Time to wrap up

Tens of thousands of Boeing workers have walked off the job early this morning after voting overwhelmingly to strike for higher pay, halting production of the planemaker’s strongest-selling jet as it wrestles with chronic output delays and mounting debt.

The company said on Friday it was ready to talk and “get back to the table to reach a new agreement” as striking workers picketed.

Newly installed Boeing CEO Kelly Ortberg had pleaded with workers not to go on strike – the first since 2008 – ahead of the vote, saying the action would put the company’s “recovery in jeopardy”.

About 33,000 workers in Boeing’s US Pacific north-west region late on Thursday voted down a tentative agreement reached between their union and the company that included a 25% pay increase over four years. They voted in favor of a strike beginning on Friday at midnight Pacific time (8am UK time), which will halt production of the 737 Max.

Boeing workers voted 94.6% to reject the agreement, and 96% in favor of striking.

News of the strike knocked Boeing’s shares down by 2% in early trading; they’ve since recovered slightly, and are down 0.9% at $161.41.

In other news…

The gold price has hit a new alltime high of $2,583.29 per ounce, as the US dollar weakens ahead of an expected cut to US interest rates next week.

Goldman Sachs have predicted that UK interest rates will have been slashed to 3% in a year’s time, down from 5% today.

Shares in Boeing have dropped at the start of trading in New York, as investor react to the strike action underway at its factories.

Boeing’s shares are down 1.5% in early trading, to $160.53, following last night’s news that staff had voted to reject a pay deal, and to go on strike.

They are the top faller on the Dow Jones industrial average this morning.

That takes their losses so far this year to over 38%.

Goldman Sachs have predicted that UK interest rates will have been slashed to 3% in a year’s time, down from 5% today.

In a new research note today, Goldman analyst James Moberly forecasts that the Bank of England will reconsider its cautious approach later this year.

Moberly writes:

With Bank Rate currently well above our terminal rate forecast, we see compelling reasons for the MPC to accelerate the pace of easing as wage pressures moderate and underlying services inflation falls back.

We therefore expect the Bank to cut sequentially from November until Bank Rate reaches 3% in September 2025.

Goldman also expect the Bank will vote to leave interest rates on hold at 5% at next week’s meeting. They anticipate a 7-2 split on the monetary policy committee, with just deputy governor Sir Dave Ramsden and external member Swati Dhingra voting for a cut to 4.75%.

Ovee in Moscow, Russia’s central bank has raised interest rates to 19%.

The Bank of Russia voted to increase its bench mark rate by one percentage point, due to concerns over high inflationary pressures.

The Bank says:

By the end of 2024, annual inflation is likely to exceed the July forecast range of 6.5–7.0%. Growth in domestic demand is still significantly outstripping the capabilities to expand the supply of goods and services.

It hopes that tightening monetary policy will reduce inflation expectations and help bring inflation down to its 4% target in 2024.

It also hints that further tightening may be needed, saying:

The Bank of Russia holds open the prospect of increasing the key rate at its upcoming meeting. According to the Bank of Russia’s forecast, given the monetary policy stance, annual inflation will decline to 4.0–4.5% in 2025 and stay close to 4% further on.

Almost half the UK public believe interest rates are too high, a new survey shows.

The Bank of England’s latest quarterly survey of public attitudes to inflation, released this morning, shows that 42% of respondents thought that interest rates should ‘go down’. That matches the reading back in May.

Just 9% of respondents think rates should ‘go up’, down from 10% in May, while 28% thought interest rates should ‘stay where they are’ (up from 24%).

The Bank’s next interest rate meeting is next week; the financial markets indicate there’s a 77% chance that rate are left on hold.

Today’s survey also found that people expect inflation to average 2.7% over the next year, down from the 2.8% expected in May [inflation was 2.2% in July]. That’s the lowest since August 2021.

Back in the UK, Liam Byrne MP has been re-elected as chair of parliament’s Business and Trade Committee.

Byrne also let the committee, which scrutinises the policy, spending and administration of the Department for Business and Trade and its public bodies, in the last parliament.

He says it’s a huge honour to be re-elected, adding:

MPs welcomed the hard-hitting style we pioneered in the last parliament, but, above all, the whole House wants to rebuild an opportunity economy in Britain.

“People know that the Business and Trade Committee is the key space in parliament where we can hold ministers to account and, crucially, find that overlapping consensus about the big steps our great nation needs to take to deliver the fastest growth in the G7, rebuild trade alliances with our allies and ensure that wealth is fairly shared. I can’t wait to get started.”

Byrne was pushed quite close in the voting by his fellow Labour MP, Matt Western, who also ran for the job.

Three hundred and two MPs voted for Byrne, while Western, the Labour MP for Warwick and Leamington, received 251 votes.

Beijing’s finance ministry has imposed a six-month business suspension on PwC’s auditing unit in mainland China over the auditing of Evergrande.

PwC has also been hit with financial penalties totalling around £47m.

Reuters has the details:

The ministry also imposed a fine of 116 million yuan (£12m) on PwC Zhong Tian LLP, the registered accounting entity and the main onshore arm of PwC in China, according to a statement on the MOF website.

China’s securities regulator said in a separate statement that it confiscated the unit’s revenue involved in the Evergrande case totalling 27.7 million yuan (£3m) and fined the unit 297 million yuan (£32m).

Such a ban had been expected:

PwC has been in hot water in China since Beijing’s securities regulator said that Evergrande had inflated its revenues by almost $80bn (£61.6bn) in 2019 and 2020, before its collapse in January.

Shares in Boeing are on track to fall when Wall Street opens later today.

Premarket trading has just begun, and Boeing’s shares have fallen by over 4% as investors react to the strike which has hit its operations today.

The bosses of Vodafone and Three have just declared that they disagree with the Competition and Markets Authority’s provisional findings against their merger (see earlier post).

Margherita Della Valle has told reporters that the merger would be a “catalyst for change”, that would lead to more competition and unlock £11bn of investment.

Della Valle also points out that CMA’s decision isn’t final; Vodafone is looking forward to working with the regulator to get final approval, she says.

Della Valle argues that combining Vodafone and Three would “take the handbrake off” the UK’s connectivity, and build “the world-class infrastructure” the country deserves.

She disagrees with the CMA’s argument that the deal could lead to higher prices, insisting that there are no plans to change pricing strategies.

Della Valle pledges:

We not see the possibiltiy of pricing increasing going forward.

Robert Finnegan, the CEO of Three UK, tells the media that the deal would bring “best in class 5G” to the UK.

Both CEOs also reject the CMA’s argument that the deal could hurt wholesale telecoms customers (who buy network capacity from operators). They argue that a combined Vodafone-Three would be a stronger competitor with other wholesale providers.

Here are some photos of Boeing workers voting on their pay deal yesterday:

Boeing has declared that it is ready to return to negotiations with its worker to agree a pay deal.

In a statement issued after staff voted to strike, the company says:

The message was clear that the tentative agreement we reached with IAM leadership was not acceptable to the members.

We remain committed to resetting our relationship with our employees and the union and we are ready to get back to the table to reach a new agreement.

Newsflash: Britain’s competition regulator has raised concerns over the proposed merger of two mobile phone companies.

The Competition and Markets Authority (CMA) has warned this morning that Vodafone’s $19bn merger with Three UK could hurt customers.

The deal could lead to “tens of millions of mobile customers having to pay more” for their services, the CMA says, as it sets out its provisional view on the merger.

On the other hand, it also flags that the merger could improve the quality of mobile networks.

The competition watchdog says:

The CMA has particular concerns that higher bills or reduced services would negatively affect those customers least able to afford mobile services as well as those who might have to pay more for improvements in network quality they do not value.

As a result, the CMA has provisionally concluded that the merger would lead to a substantial lessening of competition in the UK – in both retail and wholesale mobile markets.

That’s potentially a blow to Vodafone and Three’s hopes. But, this isn’t a final decision – the CMA is going to consult, and see what commitments could be made to adress its concerns.

But, it retains the option to prohibit the merger if it’s not satisfied.

Stuart McIntosh, chair of the inquiry group leading the investigation, says

We’ve taken a thorough, considered approach to investigating this merger, weighing up the investment the companies say they will make in enhancing network quality and boosting 5G connectivity against the significant costs to customers and rival virtual networks.

We will now consider how Vodafone and Three might address our concerns about the likely impact of the merger on retail and wholesale customers while securing the potential longer-term benefits of the merger, including by guaranteeing future network investments.

The Unite union has urged the CMA to block the deal, fearing it would lead to job losses and higher prices.

Boeing is facing possible delays to the production of some planes after machinists at the troubled aircraft manufacturer voted to go on strike.

Tens of thousands of workers at Boeing have voted to reject a new contract, which would have raised their pay by 25% over four years, and to go on strike instead – the first walkout in 16 years.

The move puts pressure on the aircraft manufacturer to offer more generous terms, and is a fresh blow to Boeing as it tries to raise quality following problems with its manufacturing processes.

The International Association of Machinists and Aerospace Workers said 94.6% of voting workers rejected a new contract and 96% approved the strike — easily surpassing a two-thirds requirement. IAM District 751 represents over 30,000 Boeing workers in Washington state

The strike was set to begin today in the US.

Boeing CEO Kelly Ortberg had pleaded with workers not to go on strike, warning it would put the company’s “recovery in jeopardy”.

S&P Global Ratings has flagged that an extended worker strike could delay the planemaker’s recovery and hurt its overall credit rating.

Ben Tsocanos, aerospace director at S&P Global Ratings, believes the strike could undermine Boeing’s ability to reach its target of increasing MAX jet production to 38 planes a month by the end of the year.

Tsocanos added:

“A shorter strike (along the lines of the situation at Spirit Aero last summer where union leadership accepted the company’s offer and membership rejected it) would probably be manageable for the company and the rating.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Optimism that the US central bank will finally start cutting interest rates next week has helped to push the gold price to a new alltime high.

Spot gold has hit a record high of $2,570.03 per ounce this morning, adding to strong gains on Thursday. Bullion has gained about 3% so far this week, and 25% so far this year.

The gold price was pushed up by a weakening US dollar, which is close to its lowest level of 2024.

The dollar slipped as investors ponder how aggressively the US Federal Reserve will cut borrowing costs. A cut – the first in the current cycle – next week is widely expected, but traders are split between anticipating a small, quarter-point cut or a larger half-point reduction to the Federal funds rate.

Kyle Rodda, senior financial market analyst at capital.com, explains:

The weaker Dollar provided room for gold to finally break-out to new record highs. Although yields have lifted as the markets price-out a 50 point move from the US Federal Reserve, the drop in the Greenback was enough to spark a break-out for the yellow metal from its recent range.

The outlook and price-action remains bullish for gold, even if sentiment might be erring on the excessively bullish side.

The agenda

• 8.30am: Eurozone finance ministers hold a Eurogroup meeting in Budapest

• 9.30am BST: Bank of England/Ipsos Inflation Attitudes Survey

• 10am BST: Eurozone industrial production data for July

• 3pm BST: University of Michigan’s US consumer confidence report